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Corporate bonds have been a major source of medium and long-term financing in Brazil. We analyze how corporate bond covenants have been used to mitigate agency costs…
Corporate bonds have been a major source of medium and long-term financing in Brazil. We analyze how corporate bond covenants have been used to mitigate agency costs between shareholders and bondholders. Our data includes 119 corporate bond indentures issued in Brazil from 1998 to 2001. This paper analyzes whether public investors have demanded stricter terms in corporate bond indentures. When comparing to previous studies of Anderson (1999) and of Filgueira and Leal (2001), we found empirical evidence that: (a) more bond issues with no indexed inflation features, but more floating rate interest features to match market needs; (b) no major changes for contingent maturity features; (c) loose covenants with respect to dividend and financing actions; and (d) tighter covenants regarding change in control and/or ownership and negative pledge. There is empirical evidence that the role of sponsor may partially mitigate risks borne by bondholders.
This book is an attempt to reflect on what we have learned from financial policies and financial crises in Latin America. The 21 chapters in this volume capture the developments in various ways. They cover theoretical contributions, regional empirical studies, and specific inquiries on Argentina, Brazil, Chile, Colombia, Cuba, Ecuador, Mexico, Peru and Venezuela. The breadth of methodologies implemented suggests that researchers are looking at Latin American financial markets through a variety of lenses. The chapters are divided into 7 parts, including, in Part I, an initial overview. Part II examines the foreign exchange markets in Latin America and their interactions with other markets. Part III discusses dollarization issues in the region. Part IV then takes up the issue of banking in Latin America. Equity and bond markets are considered in Parts V and VI, respectively. Lastly, Part VII considers pension systems in Latin America. Taken as a whole, the 21 chapters seize the excitement of studying Latin America and provide lessons that are applicable around the world.